December 30, 2014 / 3:05 PM / 5 years ago

Rival China trainmakers merge to boost high-speed rail push abroad

SHANGHAI, Dec 30 (Reuters) - China’s top two trainmakers said on Tuesday that they will merge, creating a $26 billion company able to compete with the likes of Germany’s Siemens and Canada’s Bombardier for global rail deals.

State media reported in October that state-owned firms China CNR and CSR Corp were in merger talks.

A joining of the firms - which have so far competed against each other to sell trains abroad - will help solidify China’s campaign to sell its high-speed technology abroad.

Under the deal, CSR will issue shares to CNR’s shareholders, with a swap ratio of one CNR share for 1.1 CSR share.

“A merged new firm will further improve product mix...enhance technological strength and optimise global resource allocation,” the companies said in a statement.

The new company would have a combined annual revenue of about 200 billion yuan ($32.71 billion) based on 2013 company data, compared with Siemens’ 75.9 billion euros ($96.5 billion) revenue last year and Bombardier’s $18.2 billion.

CNR and CSR, which are already the world’s largest train makers thanks to robust domestic sales, halted trading on Oct. 27 and issued statements saying they would resolve “major issues” soon.

Hong Kong-listed shares in CNR and CSR closed at HK$7.66 and HK$7.89 respectively on Oct. 24 giving them a combined market value of HK$202 billion ($26 billion).

Trading in both firms will restart on Dec. 31, the statement said.

The trainmakers were demerged from the government in 2000 to promote competition, and have profited from China’s drive to connect the vast country by rail. Their main domestic customer is national operator China Railway Corporation.

China built the world’s longest high-speed train network in less than a decade and has expressed its desire to export its rail technology. The two state-owned firms however have fiercely competed against each other to win international deals.

In 2011, they fought a price war for a Turkish contract, which eventually went to a South Korean firm. Two years later, they disputed over a deal to supply trains to Argentina, leading the now-defunct Ministry of Railways to openly criticise the firms, according to financial news magazine Caixin.

Most recently, both firms have separately indicated their early interest in supplying trains to California’s proposed $68 billion high-speed network.

In October, China CNR won a $567 million contract to supply trains to Boston, the first win for a Chinese railway equipment maker in the U.S.

1 US dollar = 7.7577 Hong Kong dollar Reporting by Brenda Goh; editing by Susan Thomas

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